scholarly journals The stock market bubble of 1929: evidence from clsoed-end mutual funds

1991 ◽  
Vol 51 (3) ◽  
pp. 675-700 ◽  
Author(s):  
J. Bradford De Long ◽  
Andrei Shleifer
Keyword(s):  
Stock Market ◽  
Mutual Funds ◽  
Market Value ◽  
Late Summer ◽  
Asset Values ◽  
The Difference ◽  
Fundamental Value ◽  
Fundamental Values

Economists directly observe warranted “fundamental” values in only a few cases. One is that of closed-end mutual funds: their fundamental value is simply the current market value of the securities that make up their portfolios. We use the difference between prices and net asset values of closed-end mutual funds at the end of the 1920s to estimate the degree to which the stock market was overvalued on the eve of the 1929 crash. We conclude that the stocks making up the S & P composite were priced at least 30 percent above fundamentals in late summer, 1929.

scholarly journals Relative Versus Fundamental Valuation: An Empirical Study of US Biotechnology Firms Around the 2000 High-Tech Bubble

2020 ◽  
Vol 11 (6) ◽  
pp. 226
Author(s):  
Dzung Viet Nguyen
Keyword(s):  
Stock Market ◽  
Firm Valuation ◽  
High Tech ◽  
Biotechnology Firms ◽  
Residual Income Model ◽  
Relative Value ◽  
Before And After ◽  
Fundamental Value ◽  
Income Model ◽  
Fundamental Values

This study is related to the issue of whether the stock market reflects the fundamental value of high-tech firms around the 2000 high-tech bubble. We extend the literature on firm valuation by exploiting the conceptual difference between intrinsic and relative values. We apply the residual income model and valuation multiples to estimate these two values respectively and make a comparison for a sample of biotechnology firms. Under realistic assumptions, it seems that estimated fundamental values of these firms fail to be reflected by the stock market. Their market valuation is rather based on relative value for both periods before and after the fall of high-tech stocks.

scholarly journals Anomalies: Closed-End Mutual Funds

1990 ◽  
Vol 4 (4) ◽  
pp. 153-164 ◽  
Author(s):  
Charles M. C Lee ◽  
Andrei Shleifer ◽  
Richard H Thaler
Keyword(s):  
Financial Markets ◽  
Mutual Funds ◽  
Asset Value ◽  
Net Asset Value ◽  
Asset Values ◽  
Closed End Funds ◽  
Fundamental Values ◽  
Over Time

The pricing of closed-end funds presents several puzzles. The following are the four sets of facts that any theory of closed-end fund pricing must address. 1) New funds appear on the market at a premium and move rapidly to a discount. 2) Closed-end funds usually trade at substantial discounts relative to their net asset values. 3) Discounts (and premia) are subject to wide variation, both over time and across funds. 4) When closed-end funds are terminated, either through merger, liquidation, or conversion to an open-end fund, prices converge to reported net asset value. These four puzzles raise basic questions about the operation of financial markets. How can prices diverge from fundamental values? Why don't the forces of arbitrage drive prices back in line? These are the questions we will try to address in this column.

Can Noise Traders Cause Persistent Deviations from Fundamental Values on the Stock Market? / Können Noise Trader langfristige Abweichungen der Aktienkurse von ihren Fundamentalwerten bewirken?

1999 ◽  
Vol 219 (5-6) ◽  
Author(s):  
Mathias Binswanger
Keyword(s):  
Stock Market ◽  
Future Development ◽  
Stock Prices ◽  
Rational Expectations ◽  
Price Volatility ◽  
High Price ◽  
Noise Traders ◽  
Noise Trader ◽  
Fundamental Value ◽  
Fundamental Values

SummaryModels which are built on the assumption of rational expectations can easily outline the conditions under which bubbles may exist but they remain silent on the factors that cause the price to deviate from the fundamental value. In this paper it is argued that dynamic extensions of the noise trader model of De Long et al. (1990a) may provide a behavioral explanation of persistent deviations of stock prices from their fundamental value if changing fundamentals and especially fundamental shocks are included. As a consequence the pattern and the sustainability of bubbles also depend on noise traders’ reaction to fundamental shocks. In the multi period extension of the noise trader model developed in the paper noise traders’ behavior is captured by two components. First, there is a fundamentally unwarranted optimism about the future development of dividends independent of the recent development of fundamentals. Second, noise traders overreact to an average of recent dividend shocks, which results in waves of optimism or pessimism that create high price volatility. The model shows that sustainable bubbles are slowly growing, while large overreactions to fundamental shocks will result in fast growing but frequently bursting bubbles.

scholarly journals XXIII.—On the Disruptive Discharge of Electricity: An Experimental Thesis for the Degree of Doctor of Science, Department A

1878 ◽  
Vol 28 (2) ◽  
pp. 633-671 ◽  
Author(s):  
Alexander Macfarlane
Keyword(s):  
Copper Wire ◽  
Late Summer ◽  
The Other ◽  
Straight Line ◽  
Summer Session ◽  
The Difference ◽  
A Chain ◽  
The One ◽  
Metallic Parts ◽  
The University

The experiments to which I shall refer were carried out in the physical laboratory of the University during the late summer session. I was ably assisted in conducting the experiments by three students of the laboratory,—Messrs H. A. Salvesen, G. M. Connor, and D. E. Stewart. The method which was used of measuring the difference of potential required to produce a disruptive discharge of electricity under given conditions, is that described in a paper communicated to the Royal Society of Edinburgh in 1876 in the names of Mr J. A. Paton, M. A., and myself, and was suggested to me by Professor Tait as a means of attacking the experimental problems mentioned below.The above sketch which I took of the apparatus in situ may facilitate tha description of the method. The receiver of an air-pump, having a rod capable of being moved air-tight up and down through the neck, was attached to one of the conductors of a Holtz machine in such a manner that the conductor of the machine and the rod formed one conducting system. Projecting from the bottom of the receiver was a short metallic rod, forming one conductor with the metallic parts of the air-pump, and by means of a chain with the uninsulated conductor of the Holtz machine. Brass balls and discs of various sizes were made to order, capable of being screwed on to the ends of the rods. On the table, and at a distance of about six feet from the receiver, was a stand supporting two insulated brass balls, the one fixed, the other having one degree of freedom, viz., of moving in a straight line in the plane of the table. The fixed insulated ball A was made one conductor with the insulated conductor of the Holtz and the rod of the receiver, by means of a copper wire insulated with gutta percha, having one end stuck firmly into a hole in the collar of the receiver, and having the other fitted in between the glass stem and the hollow in the ball, by which it fitted on to the stem tightly. A thin wire similarly fitted in between the ball B and its insulating stem connected the ball with the insulated half ring of a divided ring reflecting electrometer.

A model for the elaboration of fair divisional projects in inheritance disputes

2018 ◽  
Vol 36 (2) ◽  
pp. 186-202
Author(s):  
Francesco Tajani ◽  
Pierluigi Morano
Keyword(s):  
Design Methodology ◽  
Market Value ◽  
Content Type ◽  
Mathematical Formulas ◽  
Mathematical Algorithms ◽  
Complex Inheritance ◽  
Fundamental Value ◽  
Definition Of ◽  
Calculation Software ◽  
Legal Right

Purpose The purpose of this paper is to develop a method to support the definition of efficient and fair divisional projects in particularly complex cases concerning inheritance disputes. Design/methodology/approach First, the approach involves an appraisal of the market value of the assets, along with an analysis of the respective conditions of concrete divisibility; then, two mathematical models have been developed for the assignment of the assets to the subjects involved in the divisional projects. The logic underlying of both models has been translated into mathematical algorithms that allow for the minimization of the monetary compensations resulting from the differences between the legal right shares and the actual portions to be attributed to them. Findings Both models have been developed through mathematical formulas that can be easily implemented by using an appropriate calculation software. They can be used in particularly complex inheritance divisions, in which the deceased’s assets are numerous and there are several heirs with similar or different legal right shares. Originality/value The methodology is useful in the disputes that could arise in hereditary successions. The fundamental value is that the models could support the definition of the best solution in particularly complex situations, characterized by a large number of assets to be assigned and/or the existence of “preferential” constraints for the assignment of the assets.

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